UPDATE 06/06/2011
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The script discussed in this thread only works good with high quality film transfers.
The digital source must be progressive and there should be no duplicate frames.

Many people, however, are having already a digital transfer of their old 8mm films on DVD.
My script is useless here. But you can use some parts of it.
For those people, FPP has made this exellent thread:http://forum.doom9.org/showthread.php?t=161493

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ORIGINAL POSTING 14th january 2009:
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I have posted an example clip on Vimeo to show the people the incredible power of Avisynth.

With special thanks to Fizick, Didée, Manao for making these exellent plugins available for all of us.

Special thanks to Josey_Wells too for the multithreaded version.
Averaging more then 4 frames in MVDegrainMulti() works very well for removing film dirt spots.

The example clip is showing the result of a special film restoring script I have made.

The filmtransfer itself was done by me, but that film needs a second wetgate transfer.
There was a dirt spot on the CCD from my camera too. But that's easy enough to fix.

It really is a fantastic demonstration. AviSynth is severely overlooked. I've seen other forums, where basically the advice goes like this: get a Mac. Get Final Cut Pro. Buy expensive stuff. But on the fundamentals of video and compression, the majority of people are clueless. I know a guy who works on video all the time (he's the video guy for a local institution) and he didn't know that film is 24fps and US TV is [approximately] 30. I don't say this to slam anyone, for we're all students at some level, it's just a shame they aren't getting more out of software/equipment that can cost thousands. Not every video should be processed with the same one-size-fits-all settings.

That's really an amazing result. However I've noticed that when we pause the movie (for example on the cactus trees), there seem to be no details in the source. As it's impossible to get details that weren't present in the original, I suspect it's a compression side effect. It looks as if the original image is more compressed than the processed one.

The old double-8mm film frame format is very tiny: 4.20x3.60mm. And because of the used anamorphic lens, that film was not so sharp to begin with. I have seen better. Second, I have captured the film with gamma set pretty high on my machine vision camera. It's a trick to be able to capture the dynamic range of real film.

So yes, the compression from my mpeg4 example clip is removing some detail from the original indeed.

One recommendation is to make the crop values multiples of 8 - LSF corrupts the output with the non-mod8 crop.

Good hint! I did not realise this because it works without error messages. My machine camera source is 1024x768. When cropping 30 pixels on each side I get 964x708. But 960x704 would be better indeed. I will test this at once.